Have you been informed that the delivery of a product you ordered is delayed? Or have you gone to a store and seen a “temporarily out of stock” sign on a shelf?
These inventory problems are most likely caused by the delay in shipments arriving from Asia to ports on the west coast. In addition to the delays, transportation costs have skyrocketed. According to Maritime Executive Magazine, “With global demand remaining high for container carriers, long-term contract ocean freight rates are remarkably 85.5% higher than a year ago. “
The two largest ports on the west coast of the United States, Long Beach and Los Angeles, are severely remote and the problem only appears to be getting worse. Workers are working desperately hard to unload containers from ships, as more and more ships arrive. Recently at both ports all port terminals were busy unloading container ships, while more than 70 other ships floated along the coast waiting their turn to be unloaded. Literally billions of dollars in products are floating around. Often, ships take more than a week to dock. This contrasts directly with the pre-pandemic times when ships waited very little time to be unloaded.
Three factors appear to be involved in the current delays.
The first is growing consumer demand from the American public, who have come under 18 months of pandemic pressure, and are now in a buying frenzy. The automotive, consumer products and housing sectors are experiencing strong demand. Many products and / or components for manufacturing items such as automobiles, computers, and mobile phones originate from Asia by ship to the United States. Suppliers and manufacturers are struggling to keep up with demand.
Second, the current port infrastructure is not equipped to cope with the increased demand. These are extraordinary times and infrastructure cannot be improved overnight to extend service to sea ports of entry. Think of the Arab oil crisis of the early 1970s. The Organization of Petroleum Export Companies, irritated by American support for Israel during the Arab-Israeli war, declared an oil embargo on the United States, which caused fuel shortages. Consumers lined up at gas stations, sometimes for miles to buy fuel. As the demand for fuel increased, gas stations were unable to expand their operations and build new filling lines quickly enough to provide service. This is the same situation in which the main ports of entry find themselves in terms of demand.
The third factor causing the backlog relates to the ships themselves. Container ships today are up to three times the size of ships used 10 years ago. The capacity of a cargo ship is measured in 20ft equivalent units or TEUs – this refers to the measurement of a 20ft long container. The larger vessels are now capable of carrying over 23,000 TEUs, with ships expected to be delivered capable of carrying over 24,000 TEUs. Larger ships take longer to unload. More workers, equipment, and even storage space are needed to accommodate shipments. This causes a traffic jam with ships queuing for their tower to be unloaded, and the situation escalates on its own.
The delays have become so severe and unpredictable that large companies are trying to control their risks. Companies such as Home Depot and Walmart have started renting their own ships in an attempt to control the delivery times of their shipments. While these chartered vessels may also fall into the waiting pattern of vessels waiting off ports, this saves them from having to queue to reserve their cargo on major cargo lines.
To reduce congestion, the Port of Long Beach is implementing a new pilot program to allow trucks to access cargo between 11 p.m. and 1:30 a.m. This will allow them to move more cargo out of the port and transport it. on highways at times when there is less traffic. Many congested ports are now studying the feasibility of moving to 24/7 operations.
Despite such efforts, the backlog of offshore container ships waiting for days to be unloaded does not appear to be ending in the near future. Current demand remains high and the holiday season is just around the corner. Despite the trade war between the United States and China and the tariffs it imposes on goods imported from China, Americans will continue to purchase inexpensive Chinese goods that are shipped to us via sea containers. The world’s largest vessels, with over 24,000 TEUs, will see their final construction and delivery in less than two years.
As these factors converge, beachgoers and surfers alike will continue to see a familiar device off the southern California coast – ships laden with cargo waiting their turn to dock.
Jerry Pacheco is the Executive Director of the International Business Accelerator, a nonprofit business advisory program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or [email protected]